This watchdog blog, by journalist Norman Oder, offers analysis, commentary, and reportage about the $4.9 billion project to build the Barclays Center arena and 16 high-rise buildings at a crucial site in Brooklyn. Dubbed Atlantic Yards by developer Forest City Ratner in 2003, it was rebranded Pacific Park in 2014 after the Chinese government-owned Greenland Group bought a 70% stake in 15 towers. New York State still calls it Atlantic Yards. Contact: AtlanticYardsReport[at]hotmail.com

Sunday, May 17, 2015

Third of a five-part series on Forest City Ratner's plans for Nassau Coliseum redevelopment. Part 1 concerned the overall plan. Part 2 addressed the curious politics of a Community Benefits Agreement. This addresses the astonishing pitch in China for EB-5 investment. Part 4 discussed Forest City's claim, at the Nassau County Legislature, it wasn't making much profit on EB-5, and its defense of a sketchy fundraising partner. Part 5 concerned the brazen effort by EB-5 promoters to use an excerpt from this blog.

In August 2013, when Forest City Ratner's Nassau Events Center team won the bid to revamp the Nassau Coliseum in a deal purported to be "100% privately financed," I asked "where's the catch?"

And Forest City has since unveiled a new way to raise more than one-third of total funding: $90 million in low-interest loans expected from 180 immigrant investors more concerned with green cards than any financial return.

That should save tens of millions of dollars, given the typical spread between conventional financing and financing under the EB-5 program, which allows entrepreneurs to hawk green cards if they can show on paper--not a big burden--that each $500,000 investment "creates" 10 jobs.

EB-5 promoter Nicholas Mastroianni on left

EB-5 effort: "Reborn into Wholeness"

That surfaced only in late March, because Forest City had to revise its lease with Nassau County.

Actually, Forest City and its partners have been pitching the project in China since last August--as noted in the screenshots, the first of several recruitment seminars in hotel ballrooms across China.

As with many EB-5 project, the promotion, on the web (from the Qiao Wai migration agency) and during events, has been long on glitz, short on details.

In China, the plan was hyped as "Reborn into Wholeness," as shown at the launch event Beijing last August. That came was some unintended irony.

The hockey deception

It featured kids in hockey uniforms, a misleading choice, given that major league hockey, however much it has defined the Nassau Coliseum, is moving to the Barclays Center in Brooklyn later this year. It's hard to consider the Coliseum "whole" when it's losing its main tenant.

The promotional material for the EB-5 investment has described the Coliseum as the historic home of the Islanders but not--as far as I can tell--explained the New York Islanders are leaving for Brooklyn.

If that's consistently obscured, that's par for the course. As immigration attorney Jose Latour wrote in March 2014, though not addressing this specific case:

Over the past three years and my dozens of trips to East Asia, I have witnessed what I can only describe as a pandemic of hype-driven EB-5 marketing, particularly in China, which operates not only in flagrant disregard of both U.S. and local securities laws, but in flagrant disregard of fundamental principles of fair dealing and business integrity. Many - not all but many - Chinese migration agents base their forceful "buy" recommendations not on the underlying integrity of the EB-5 project and its principals but on the size of the "success" fee offered.

And, as is obvious from the screenshots and associated web page, the Nassau Coliseum hype is produced in partnership with the U.S. Immigration Fund, the sketchy regional center (private investment pool) authorized to raise money under EB-5, as well as Forest City Ratner.

Along with Qiao Wai, they have deceptively promoted the EB-5 investment in Atlantic Yards, for example suggesting that a U.S. State Department official endorsed the project. It's hard to imagine they'd dial back for this project.Mock news predictions

Indeed, note the creative and deceptive mock-up newspaper and magazine covers--part of the pitch from an immigration broker--excerpted from the Qiao Wai web site.

They predict the arena would re-open with Billy Joel. That's not impossible; he's closing the arena.

Note this brief video from the opening event last August. It layers hip-hop music over a ceremonial puck drop, then segues into a stirringly passionate video montage of Nassau Coliseum excitement.

It confirms the observation by Fortune's Peter Elkind that "EB-5 fundraising is a messy process, more like pitching vacation timeshares than any normal form of deal finance." In other words, focus on the glitz, not the financial soundness or the plan to repay investors.

It's surely easy to do this when there's a language and cultural barrier.

(Apparently Charles Gargano, the former head of the Empire State Development Corporation, was not promoting the Nassau Coliseum at that event, but he has done so, on behalf of the U.S. Immigration Fund.)

Ratner's hype video

The Qiao Wai web site also includes "Welcome to the Future of Nassau," a video filmed mainly in Brooklyn, it seems, aimed at potential immigrant investors.

"Presented by the Team That Brought Barclays Arena To Life," it states, citing Forest City Ratner, SHoP, and Gensler, the latter not actually involved in the Barclays Center.

"Nassau Coliseum: Past Present & Future," it declares, and Bruce Ratner speaks: "The future project really starts with the existing project: Barclays Center arena. We built the Barclays Center arena and it was built using EB-5 money in part, and it turned out to be one of the best arenas in the world. In fact, it's first in ticket sales in the whole United States and first in revenue, and second in the world, it's beautiful, and it's won every single possible award."

Let's unpack that.

It wasn't built "using EB-5 money in part," unless you count EB-5 money replacing a land loan. Even the marketer of the EB-5 loan agreed the money wouldn't go into an arena.

Ratner's statements were taped last year before we learned that the Barclays Center did not have a stellar 2014, or that the high level of ticket sales/revenues does not translate into profit.

"So after that, we decided there's another great place in this area. It's on Long Island, which is about 25 miles away from Barclays Center, and it's where all the roads come together," Ratner continues. pm tje vodep. "There's three million people that live in that area. There's a very old arena there that was famous at one point. Some of the greatest singers in the world played there."

"Elvis Presley, the Beatles, as well sports teams played there," Ratner states. "A professional basketball team played there. A professional hockey team played there." That's not exactly a huge sell.

That pitch very much fits with the parade of history promoted on the web site marketing EB-5 investments, excerpted at right. That has nothing to do with whether the EB-5 investors will get their money back.

Rivaling Barclays?

"It will rival our Barclays arena," Ratner declares in the video. "It will be known as a great icon, and we will make that one of the great concert venues in the world, and EB-5 funding is the reason that that's possible."

That's quite a statement.

The new design may well be impressive, but that doesn't make it one of the world's great concert venues.

Nor does EB-5 funding make the arena possible. Forest City was already contracted to perform the renovations. EB-5 funding is what delivers the returns Ratner desires. Nassau County approved the deal before there was an inkling--at least publicly--of EB-5 funding. (Surely Ratner had the idea in mind.)

Then Ratner claims, as he has when hosted by credulousinterviewers, and as he's done in previous EB-5 videos--that "whatever I do has to have a social value," which means creating employment, creating homes, or creating economic development.

Those of course are broad categories; after all, strip mining creates employment.

Support from Nassau

The video goes on to tout "OVERWHELMING GOVERNMENT SUPPORT" and quotes Nassau County Executive Ed Mangano: "Today we stand here with a resounding Long Island yes, yes for a world-class Coliseum..."

The video closes with Ratner saying that people would say about Forest City that "they get it done; we finish things. And that's very important that is very important to all the people in EB-5, that we do what we say. We have a real track record."

That track record includes revising deal regularly, as well.

More hype

As this 8/21/14 China Daily article stated, according to a machine translation, "Project has not yet officially released the internal pre-subscription rate has reached 30 percent, described as highly anticipated!" That's a way to gin up interest.

It also highlighted the Islanders: "As the home of New York's famous ice hockey team, the Long Island stadium also hosted thousands of dollars each type of athletic competition, the world's top star concerts and numerous important exhibitions" or "they can already foresee the New York Islanders brilliant prospects stadium reconstruction project!"

New York-based EB-5 attorney Mona Shah reported 3/30.15 from the Guangdong Entry and Exit Immigration Association's annual Investment Immigration Project Exhibit, held at the Sofitel Hotel in Guangzhou. Wrote Shah and her partner:

Over 100 immigration agencies from Guangdong and around Southern China attended the event. MSA had the privilege of being the only EB-5 immigration firm from the U.S. attending and presenting at this exclusive exhibition, showcasing only a handful of investment projects from around the world.
Investment projects included projects from Malaysia, Cyprus, Portugal, with the majority of exhibitors and presentations coming from the U.S. The EB-5 projects were an interesting mix – ranging from large, glamourous real estate projects to small direct pooled projects. The projects included Mount Snow, introducing the West Lake Water project and Carinthia Ski Lodge, through the Vermont Regional Center. U.S. Immigration Fund gave a glamorous introduction to their latest project — renovating the Nassau Coliseum in Long Island, New York, on similar lines to the Barclays Center in Brooklyn, New York.

The hype worked the first time, in part because there has been little journalistic nor government scrutiny. It seems to be working again.

Below are PDFs of the Qiao Wai web site in case it disappears. It's already been updated.